Harper export bombshell leaves oilpatch puzzled

Industry eager to study policy details

Shaun Polczer
Calgary Herald
Saturday, September 27, 2008

Prime Minister Stephen Harper said in Calgary on Friday he wants to make Canada
a clean energy superpower. Part of his plan to do so includes restricting bitumen
and oilsands exports to countries that don't limit greenhouse gas emissions.
CREDIT: Ted Jacob, Calgary Herald

Oilpatch insiders are taking a wait-and-see approach to Prime Minister Stephen Harper's bombshell announcement his government would move to restrict bitumen and oilsands exports to countries that don't limit greenhouse gases.

During an election stop-over in Calgary on Friday, Harper said a re-elected Conservative government would prohibit bitumen exports to countries that don't have emission reduction targets equivalent to Canada's.

"More than just an energy provider, Canada must be a clean energy superpower," he said.

The Harper government has pledged to reduce Canada's emissions of greenhouse gases linked to global warming 20 per cent by 2020, far less than the targets agreed to by the previous Liberal government under the Kyoto Accord.

Environmentalists have complained rampant development of Alberta's oilsands -- the world's second-largest oil reserves -- is largely responsible for Canada's surging carbon footprint.

Canada produces more than a million barrels of ultra-heavy oil and bitumen a day, a figure that is expected to triple over the next decade.

To diversify export markets, companies such as Calgary-based Enbridge Inc. have proposed projects such as the $4-billion Gateway pipeline, which would move half a million barrels a day to the West Coast where it could then be shipped to places such as China.

Harper said the policy wouldn't affect current contracts with U.S. refiners but said it could "absolutely" jeopardize future exports to Asia.

Enbridge spokeswoman Gina Jordan said the company is seeking more clarity before making a formal reaction. "We were certainly surprised by today's announcement and we're looking at the details."

In past interviews, CEO Pat Daniel has said the Gateway would ship oil to Asian countries other than China, as well as American states such as California, which currently has some of the toughest greenhouse gas standards in the world.

But the U.S. itself is a patchwork of conflicting legislation and standards that may or may not be equivalent even to Canada's watered down commitments.

Joseph Doucet, a professor of energy policy and director of the Centre for Applied Business Research on Energy and the Environment at the University of Alberta, agreed most U.S. action to curb emissions is at the state level.

He said it's not clear how a Conservative government would restrict bitumen exports or whether it would be possible under deals such as the North American Free Trade Agreement.

The provinces have control over resources, but the federal government is responsible for international treaties and trade agreements.

Although it's uncommon for Ottawa to restrict certain types of exports, it's also not without precedent, Doucet said. Canada imposed trade sanctions on South Africa in the 1980s to protest apartheid and participates in efforts to curtail certain types of technology that could be used for military purposes.

In addition, countries such as the U.S., for example, have long lists of countries they won't do business with, including Cuba and Iran.

But Doucet said it's unclear how much weight Harper's proposed policy carries in the context of the ongoing campaign.

"My feeling is that it's politics . . . electioneering," he said. "I'm not sure how they would do this, or even if they can. It's likely a source of irritation for the provincial government."

Intergovernmental Affairs Minister and Deputy Premier Ron Stevens discounted the announcement, describing it as "incredibly speculative." While the province has taken steps to mandate emissions reductions for big industrial polluters, Stevens noted the federal targets haven't been formally legislated.

"Alberta's bitumen belongs to the people of Alberta and when people outside of Alberta start talking about impacting in some fashion the ability of Albertans to sell our resource, it's of interest to us," he said.

"It's not a policy. It's a statement. What it does is it just lends additional uncertainty to the matter."

Adam Sparkes, the Canadian Association of Petroleum Producers' manager of intergovernmental affairs, said the announcement came out of the blue, but said his group will work with whichever government comes to power on Oct. 14.

"We're surprised, but I wouldn't say dismayed. We're in the middle of an election and we'll stay focused on working with whichever government Canadians choose to elect."

Other points in the Harper plan included a pledge to support a Mackenzie Valley pipeline, which Canadian Energy Pipeline Association president Brenda Kenny said is positive for Canada's energy transportation companies.

Her group has more than $40 billion worth of proposed capital projects on the books, a figure that rises to $80 billion when it includes two Arctic pipelines from Alaska and the Northwest Territories.

Although she agreed the government needs to create certainty for investors, Kenny said she's not about to draw too many conclusions from Friday's announcement.

"Everybody understands that in an election campaign certain platforms are put forward that need to be fleshed out over time. I don't think it causes undue uncertainty."

Enbridge shares gained 22 cents on the Toronto Stock Exchange Friday to close at $40.50.

spolczer@theherald.canwest.com

© The Calgary Herald 2008